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How blockchain can improve ethical and sustainable practices

The complex nature of apparel and footwear product manufacturing processes has resulted in a lack of trust along the supply chain. Consumers are increasingly seeking transparency about the origin of their products. Their buying decisions are now influenced by factors such as how and where items are produced, under what working conditions, and whether components are ethically sourced.

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The lack of traceability in these supply chains is the root cause of consumer concerns and more could be done to address the issue of trust in apparel brands.

Shining a light on the apparel and footwear supply chain

Due to the nature of products and consumption patterns in the apparel and footwear industry, supply chain product traceability is a low priority. The rapid growth in apparel and footwear manufacturing has not faced a commensurate surge in regulatory scrutiny. As a result, serious social and environmental issues have surfaced in the supply chain.

In fact, the International Labour Organisation (ILO) estimates that many of the 170 million children engaged in child labour work in the apparel supply chain.

Supply chain issues remained opaque for many years, thus obscuring accountability, until recently. Consumer awareness, relentless activism and engagement are forcing brands to raise their consciousness on these issues. It has become imperative for these companies to lead the change by embracing supply chain transparency as a strategic objective. Doing so can improve risk management, process efficiencies, and most importantly, support the development of ethically sourced products.

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However, the challenge of traceability is still at hand in the industry and although databases exist in the supply chain, they are often fragmented and do not provide a single view of product provenance. For these reasons, centralisation of data is incredibly difficult and the solutions and technologies currently in place are incapable of keeping pace with this increasingly fragile ecosystem.

Because of this, all participants in this ecosystem — retailers, raw material producers, manufacturers, agents and suppliers, certifiers and auditors — will need to work together to develop new and innovative ways to improve traceability in the supply chain.

How blockchain improves traceability

Certification is the most important aspect of provenance, which proves every material input and process adheres to acceptable and ethical standards. Think of all the raw materials that go into making a piece of clothing. It starts with the fibre, which could be sourced from a plant, animal, or crude oil. Then, it is processed until it can be spun and then woven into a fabric. From there, bleaching and dye are applied. All of this often happens across different factories and geographies.

With current supply chain traceability methods, it is difficult to track whether each of these materials has been sourced ethically, and more importantly, certified. One emerging solution is distributed ledger technology (DLT), more widely known as blockchain, which can provide greater transparency, traceability and auditability across the apparel and footwear supply chain. It can also provide consumers with a lens for ethically sourced products.

So, how does it work? Blockchain is a way of record-keeping that doesn’t require third-party oversight. Essentially, every member of a DLT network has the power to authorise changes in the records, rather than relying on a third-party authority. Additionally, records of transactions or changes in the network can’t be deleted, because all members of this network have a copy of this record. Because of its nature, a DLT network enables full transparency, traceability and audibility.

A blockchain/DLT solution fits the apparel and footwear supply chain well since it’s the perfect environment to track suppliers spread across various geographies that process and transact as untrusting entities along the supply chain.

With a blockchain/DLT solution, end-users, regulators and supply chain participants can drill down and obtain greater levels of detail on the origins, purity and authenticity of the product, while also providing traceability in the event of product recalls. The elements of a distributed ledger can also increase process efficiency and lower the costs of producing the final product.

The sustainability mandate for retailers and manufacturers

Our relationship with products and how they are produced are changing and blockchain presents an opportunity to simplify the ethical sourcing of materials and ingrain transparency in the apparel and footwear supply chain.

Moreover, the product journey has been neglected when compared to the customer journey. To meet their social responsibility mandate, retailers and manufacturers must improve supply chain traceability and certification to make sure it is ethical and sustainable.

Gaurav Sharma is Head of Industries Business for ANZ at Cognizant